Risk-Based Capital (RBC)

Risk-Based Capital (RBC) is a measure used by insurance regulators to ensure that an insurance company has enough financial resources to cover its risks. It assesses the company's assets relative to the potential losses from claims and investments, with higher risk activities requiring more capital. Essentially, RBC helps determine if an insurer is financially strong and capable of paying future claims, providing a safeguard for policyholders and maintaining market stability. The goal is to prevent companies from taking excessive risks that could threaten their ability to meet obligations.